Let Rudd's fate be a lesson on minerals taxing: Rio chief

Paola Totaro

RIO Tinto chief executive Tom Albanese has warned that a form of ''resource nationalism'' may spread worldwide as governments try to boost their share of mining profits, potentially curbing supply.

Speaking at a dinner at the Lord's cricket ground in London on Thursday night, Mr Albanese also used Australia's jettisoned super-profits tax, widely blamed for Kevin Rudd's demise, as an example of bad policy and issued a veiled warning to other nations to heed his fate.

''Policymakers around the world can learn a lesson when considering a new tax to plug a revenue gap, or play to local politics,'' he said. ''Such decisions must be made taking in a wide range of views, in a spirit of consultation and engagement. Ivory towers without windows don't work.''

Mr Albanese said a wave of resource nationalism was now likely as governments tried to find ways ''to increase their revenue share'' from mining. ''They will want to have more control of who develops their natural resources. And this resource nationalism could, by itself, limit the supply response to stronger demand.''

The Rio Tinto chief's message - delivered with an upbeat rundown on the resource giant's past year and future - comes as China, the world's biggest metals consumer, flagged plans to extend a tax on oil, gas and coal output nationally, shifting revenue from companies to local governments and raising energy prices.

As BusinessDay reported this week, the Chinese strategy has been billed as a way to stymie environmental destruction and retain value from the resource boom for impoverished but minerals-rich western China. The central government has already started a trial program in Xinjiang and China's National Development and Reform Commission vice-chairman, Du Ying, said on Wednesday that, based on the results, the scheme would be promoted nationwide.

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Mr Albanese, who was speaking to more than 500 mining executives at the London function, said that while Prime Minister Julia Gillard had jettisoned the resources super-profits tax and replaced it with a less onerous tax, he was still cautious about the alternative.

The minerals resource rent tax still left Australia at the higher end of taxation regimes worldwide for commodities such as iron ore and while it was an improvement, he was yet to be convinced.

Mr Albanese said that whether these tax concepts spread elsewhere, especially in developing countries, would depend on the circumstances of the investment opportunity.

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''While it may be appropriate in Australia, it may not necessarily suit a developing country,'' he said. ''An emerging economy might see greater advantage in levying production royalties that provide an earlier and more stable revenue stream, in contrast to a resource profits or rent tax.''

Mr Albanese said he had now asked his team to resume its work on expansion options in Australia as the company could see a more ''positive backdrop''.

''I do want to invest in Australia and recent events remove the great uncertainty which had been holding us back … but, of course, our Australian projects will always have to compete for capital with our other investment opportunities across the globe,'' he said.

''While we remain cautious on the outlook, 2010 is shaping up well from Rio Tinto's perspective. Growth is firmly back on the agenda in 2010, and if it hadn't been for the resource tax, we would have had more to talk about on that front.''

He said that he wanted to conclude his speech by ''dispelling the myth that resources are finite'': ''[This is] a notion some policymakers sometimes like to promote. Resources will only become finite if limits are placed on exploration because a country has suddenly become less attractive for investment,'' he said.